By Meghan Hall
The Bay Area’s strong and dynamic market fundamentals have provided many small businesses and property owners with a stable investment opportunities over the past several decades, and especially over the course of the past market cycle. Since the Great Recession of 2007/2008, property values in the region have exploded, prompting two Bay Area families to sell their commercial assets. In a transaction that just recently closed, the Wool and Brunst families have sold a medical office building a short distance from downtown San Jose for $9.5 million.
The buyer of the property was Market Street Development, who was represented by Sonny O’Drobinak of TRI Commercial, based in Walnut Creek. Robin Santiago, vice president at The Kase Group, represented the sellers.
“The Wool family has deep roots in Silicon Valley, having founded one of the longest-running family-owned fruit canneries in the United States (from 1903-1989),” said Santiago in a statement to The Registry. “They have owned this particular asset since the ’80s and the current market conditions provided the right opportunity to sell.”
This was the first time the property was marketed to buyers, and the sale is part of a portfolio of properties that the Wool and Brunst families are looking to sell. Santiago declined to list the other properties, but did state that they total about 5.5 acres of land in San Jose.
The property is located at 614 Tully Road and was originally constructed in 1979 as a built-to-suit for the County of Santa Clara. The County has remained the sole tenant of the 25,632 square foot building since its completion, although the current lease expired in November of 2016 and the County has since remained as a tenant on a month-to-month basis since. The County pays $62,938 per month, or just over $755,000 in annual rent. Currently, there are no renewal options remaining. Net operating income for the property totals $652,569 annually.
According to an offering memorandum released by The Kase Group, the building is situated on 2.08 acres of land and is zoned for commercial office with a General Plan designation for neighborhood or community commercial development of up to five stories. As a whole, the property represents a unique redevelopment opportunity with in-place income, one that Market Street Development plans to pursue. The new owner plans to turn the site into a Class A medical facility, says Santiago.
Neighboring development also includes the Renascent Place Apartments, which will include 160 studios and two, two-bedroom units. The property is currently under construction and is developed by Charities Housing. Upon completion, 35 percent of the units will cater to extremely low-income residents, and 65 percent of units will be reserved for very low-income residents.
A second development, located at 2410 Senter Road, is being developed by the County of Santa Clara, the current tenant of the Tully Road Property. The three-story, 50,000 square foot office project broke ground in November of 2019. According to the County of Santa Clara Facilities and Fleet Department website, the property is slated to become home to the County of Santa Clara Vietnamese-American Service Center (VASC). Upon its completion in the fall of 2021, the VASC will offer health services within the community which have largely been lacking due to cultural and language barriers.
For now, it is unclear what will become of the County’s current home along Tully Road. However, Market Street Development’s repositioning of the site will cater to California’s third-largest city. Silicon Valley continues to be an epicenter of high-tech and medical innovation. Once complete, the new property will have numerous growing and innovative companies, a highly educated workforce and other strong demographic fundamentals within close proximity, pointing to a continued, healthy investment for Market Street Development.